Risk Aversion at the Country Level

Gándelman, Néstor; Hernández-Murillo, Rubén

doi:10.20955/wp.2014.005

Cited by 38 publications

(23 citation statements)

References 19 publications

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“…CRRA is commonly assumed in developing‐country studies and the power risk aversion function has been widely used in studies of risk preferences in these settings (Ahmed et al., ; de Brauw and Eozenou, ; Gandelman and Hernández‐Murillo, ; Harrison et al., ; Liu, ; Szpiro and Outreville, ; Tanaka et al., ). A key advantage of a CRRA specification is that the coefficient of relative risk aversion, λ, is a unit‐free elasticity, making estimates across studies directly comparable…”

Section: Simulation Modelmentioning

confidence: 99%

“…Szpiro and Outreville () considered risk preferences in 31 countries (20 developed and 11 developing countries), and their estimated values of CRRA in the developing countries vary from 1.19 to 4.87, with a mean value equal to 2.89. Gandelman and Hernandez‐Murillo () estimated the value of CRRA for 23 developed and 52 developing countries, with results for the developing countries falling in the range of [0.04, 2.96] with an average equal to 1.00.…”

Section: Simulation Modelmentioning

confidence: 99%

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Price premiums, payment delays, and default risk: understanding developing country farmers’ decisions to market through a cooperative or a private trader

Saitone

Sexton

Malan

2018

Agricultural Economics

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Smallholder farmers in developing countries face a competitive disadvantage in modern agricultural supply chains. Joint marketing through cooperatives is a potential tool to mitigate these disadvantages; yet cooperatives' success in these settings is uneven at best. We develop an analytical model to study a farmer's choice of selling to a private trader who pays cash on delivery but may exercise market power or a cooperative that promises a price premium but delays payment and carries a concomitant risk of default. In the presence of impatient and risk-averse farmers, we show that these factors can severely limit smallholder patronage of a cooperative, despite a promised price premium. We then construct and parameterize a simulation model to fit a profile of heterogeneous farmers within a prototype developing-country village, and study the optimal decisions of farmers regarding marketing through a cooperative versus a private trader. Results suggest that modest improvements in either timeliness of payment or probability of default can induce a substantial increase in a cooperative's market share and economic viability. Extending the simulation analysis to a dynamic setting shows how implementing reasonable policies to improve a cooperative's payment timeliness and default probability can markedly improve its growth trajectory.JEL classifications: O13, Q13

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Section: Simulation Modelmentioning

confidence: 99%

Section: Simulation Modelmentioning

confidence: 99%

Price premiums, payment delays, and default risk: understanding developing country farmers’ decisions to market through a cooperative or a private trader

Saitone

Sexton

Malan

2018

Agricultural Economics

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“…Regarding the risk aversion parameter, the research 42 uses the data on the satisfaction and personal well-being of individuals in 80 countries and classify Croatia as the developed country. The average risk aversion coefficient is 1.01, and the conclusion 42 is that their result supports logarithmic utility function. Accordingly, the parameter of risk aversion is 1, which is in line with the calibration of Galì and Monacelli.…”

Section: The Calibration Of Dsge Model With Financial Frictions For Cmentioning

confidence: 85%

The empirical evaluation of monetary policy shock in dynamic stochastic general equilibrium model with financial frictions

Palić

2018

International Journal of Engineering Business Management

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Large body of empirical literature points to the tight integration of financial and credit markets with real economic activity as well as the need for inclusion of financial frictions into macroeconomic modelling. After the recent mortgage loan crisis which spilled over into the global financial crisis, the assessment of relationship of monetary policy and house prices gained in importance. The aim of this article is to test the compliance of monetary policy shock in calibrated dynamic stochastic general equilibrium (DSGE) model which includes financial frictions with the empirical impact of monetary policy shock in Croatia estimated using vector autoregression (VAR) model. After the DSGE model is calibrated, the VAR model is estimated for Croatia. The comparative analysis of impulse response functions of DSGE and VAR model is conducted. In both models, monetary policy shock has positive initial impact on interest rate and negative initial impact on house prices and output gap. Results indicate that empirical impact of the monetary policy shock adequately reflects the impact of monetary shock in DSGE model with financial frictions.

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“…This purely mechanical restriction implies that the negative effect of output volatility on investment requires γ < 1. Although empirical estimates of γ vary broadly Gandelman and Hernandez-Murillo ( 2015 ) suggest that the most widely accepted values of γ lie between 1 and 3. These values of γ imply a positive effect of output volatility on investment.…”

Section: Theoretical Backgroundmentioning

confidence: 99%

Economic disasters and aggregate investment

Ćorić

Šimić

2021

Empir Econ

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The -2008 global financial crisis has spurred an increasing interest for investigating the financial and macroeconomic effects of the rare but extremely large economic crises, the so-called economic disasters. Current literature on the topic shows that probability of economic disasters plays an important role in the long-run effect of output volatility on investment. This paper investigates the long-run relationship between economic disasters and aggregate investment. We analyze the data for a large number of developing and developed countries after the World War II. The conducted panel data analysis indicates a negative effect of the probability of economic disasters on aggregate investment. Our results contribute to the recent literature on economic disasters by providing empirical support for the hypothesis that probability of infrequent but extremely large economic crises has a negative longrun effect on investment. We also find that the effect of 'normal' output volatility on aggregate investment is relatively small.

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Risk Aversion at the Country Level

Cited by 38 publications

References 19 publications

Price premiums, payment delays, and default risk: understanding developing country farmers’ decisions to market through a cooperative or a private trader

Price premiums, payment delays, and default risk: understanding developing country farmers’ decisions to market through a cooperative or a private trader

The empirical evaluation of monetary policy shock in dynamic stochastic general equilibrium model with financial frictions

Economic disasters and aggregate investment

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